FYI American Media: China Is 30 Years Behind

President Obama didn’t accomplish much on his Asia trip. He has the media covering for him, though. They’re not praising him, they’re making bigger errors than he did, especially on the U.S. and China.

Not to pick on CNN (OK, maybe a little) but last night Candy Crowley told Anderson Cooper, “China has challenged if not surpassed the United States in terms of economic power” and Cooper gravely agreed. Chip Reid on CBS called America “virtually powerless” over China. This is so absurd it’s hard to know where to start.

Consider wealth. In a very hard 2008, the average American earned about $47,000. The average Chinese citizen earned $3,400. To be fair, things in China are generally cheaper so the World Bank multiplies the China number by two and a half. That leaves an American making five and half times more last year, not to mention all years before that. Has someone making $20,000 a year “challenged” someone making $110,000?

What about economic size? We hear endlessly about how fast the PRC is growing. There are more than 4 times as many Chinese as American citizens, surely their economy is larger than ours. No. The US economy is more than three times larger. If someone else’s house and yard are three times larger than mine, I’m pretty sure I haven’t “surpassed” them on that count.

The press might point to Chinese influence. China is accounting for most of the world’s growth, they might say, the world is turning to the PRC to lead it out of the recession. No.

We measure economies by gross domestic product, GDP. When counting it up, a trade surplus raises GDP and a trade deficit cuts it. China runs the world’s biggest trade surplus, the US runs the world’s biggest trade deficit. That’s a problem — for both countries, actually – but it means the US adds by far the most to the rest of the world’s GDP and China takes the most away from the world’s GDP. This year, last year, every year. The world can’t turn to the PRC for help in economic growth because the PRC every year turns to the world for help and gets it, $290 billion worth in 2008.

Now the fun one: China is America’s banker. The Obama administration has stopped saying this but the media still can’t figure it out. Let’s try one more time to get it straight:

1) The US runs a gigantic budget deficit, which hurts our economy and threatens our future.
2) The PRC holds $800 billion in treasury bonds and probably over $1 trillion in total US government bonds
3) China has no choice but to buy those bonds.

It’s complicated but, related to the fact that Beijing is scared to death of floating its currency, the PRC can’t spend at home the money they get from the world. They physically can’t. If they tried, the foreign money would end up right back with the central government, by law.

That leaves China unavoidably sitting on a huge pile of (mostly) dollars and there’s only one economy in the world big and solid enough to absorb it back – ours. They’re not lending to us, they’re investing in the only place they can. Our deficit is an American weakness but the PRC’s bond purchases are a Chinese weakness and an American strength.

And let’s not forget where the money comes from — us. Most of China’s pile of foreign money can be traced back to the bilateral trade gap. Beyond dollars, China relies on the American market for millions of its best jobs. China depends on us for these jobs, for our bond market, and for the dollar itself, which the Chinese currency is pegged to. We need them to keep our interest rates two points lower than where they should be and to finance deficits we shouldn’t be running.

My media friends: if you’re still having trouble with this, please call someone who knows what they’re talking about.

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Derek Scissors is a Research Fellow for Asia Economic Policy at The Heritage Foundation's Asian Studies Center. Scissors focuses on the Chinese economy as well as broader Asian economic trends and challenges facing the United States.

Join The Discussion

Obama is killing our economy. Like Mao did to China in the 1970'a with his Great Leap Forward, Obama is turning our economy into a shambles so he can re-make it along a Marxist model. China will suffer from this, so will the rest of the world.

TALK ABOUT PUTTING THE TRUTH ON THE TABLE.THE AMERICAN (no clue)MEDIA HAS TAKEN THE PLUNGE TO OBSCURITY.THEIR COVER UP OF OBAMAS INEPTNESS WILL BRING THIS RUDDERLESS GIANT TO ITS KNEES.THE PROUD AMERICANS(of which i'am a member)HAVE SEEN THE SELLOUT OF TRUTH AT ITS BEST,DAY AFTER DAY AFTER DAY.THE MEDIA MOGULS,ARE LITTLE PEOPLE STRUGGLING FOR AN IDENTITY THEY LOST YEARS AGO.WE,IN AMERICA DON'T NEED THEM.THEIR DEMISE WON'T COME SOON ENOUGH.AS FOR ME,I'LL CONTINUE TO GET MY NEWS THE OLD FASHIONED WAY,THE COMMON SENSE WAY.THANK YOU HERITAGE FOR THIS VEHICLE,TO VENT.THIS FELT GOOD.

I agree with most of the author's points. I don't quite get where the number "30 years" behind comes from. I get that China is behind, but how do you quantify it in number of years? I would like an explanation.

This all sounds very interesting, but I know one thing, it is the U.S. going to the PRC, hat in hand, begging them to keep loaning us more money.

Think about it. Obama wants to tell China that they aren't meeting our standards of 'human rights'. "We don't like the way you are treating your people – and by the way, could you see your way clear to buying up a couple of trillion more of U.S. Treasury bonds?"

How the PRC must be laughing. I can hear them now, "Can you believe this guy?"

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